Great, what we should be doing is taxing capital gain at a hire rate than physical labor. Why does anyone think it's OK to pay less on money you made with money you have? Especially when the difference can be as great as +25%.
If you know this you may think everybody knows this but a lot of people don't and find it highly unintuitive, so I'm going to spell it out:
In a very broad sense there are two definitions of "justice" and people will think of one or the other as obviously correct.
On the one hand you have people who think justice means that everyone can take what they need and give what they can. These people usually think that humans are cooperative by nature and are intrinsically motivated to do good by others as long as they aren't taken advantage of, i.e. as long as everyone else also gives as much as they can and only takes what they need.
On the other hand you have people who think justice means that everyone gets what they deserve. These people usually think that humans are competitive by nature and are intrinsically motivated to take advantage of others and need to be kept in their place as defined by the hierarchy they view as natural and self-evident.
You seem to be part of the former group. The people who think "it's OK to pay less on money you made with money you have" are part of the latter. Neither of the two views is "wrong" in a meaningful way, they are just fundamentally incompatible when it comes to pushing for what they see as "good" or "just".
Big problem with the economy is that it rewards zero-sum leeches rather than compensate the sacrifice of labor. And the superwealthy are always people who figured out or inherited a way to be parasites.
What an odd sentence to be followed by describing the extremely rich as "leeches" and "parasites".
Sarcasm aside, I think the problem with your analysis is that it doesn't account for people who don't benefit from the system being extremely invested in maintaining it, especially those who understand that they have no realistic chances of coming out on top.
There are a lot of hierarchical mindsets that can be deconstructed given the right exposure and sufficient time, but the belief in the necessity, inevitability and moral good of hierarchies themselves is extremely difficult to unlearn and can be found in most parts of the political spectrum (though of course being overrepresented in some groups, e.g. Evangelical Christian conservatives).
Most people therefore take some hierarchies for granted while being in disbelief that anyone could take the ones they reject seriously. You can believe in absolute meritocracy without believing in "race realism" for example.
Do you deny the existence of human-human parasitism?
> I think the problem with your analysis is that it doesn't account for people who don't benefit from the system being extremely invested in maintaining it
I don't see how that is a problem with, or even a part of, "my analysis."
> hierarchical mindsets
Hierarchy isn't the same thing as economic parasitism; it's a prerequisite of it.
Really having some difficulty connecting your comment to mine. I don't get the talk about hierarchy-in-general.
Hierarchies justify themselves either by not allowing parasitism, or else by denying and covering up its existence.
The venn diagram of people who make the rules overlaps with those who benefit.
Given all of this, I expect that the capital gain rate is specified as lower to encourage me to invest.
If the capital gain rate were higher than the income rate, I would not make risky investments. I could use my money to invest in my own business -- where I have expenses available. And, take an income. Any loss would then be an expense.
I just wouldn't invest in other business.
How would you encourage investment behavior?
Money is taxed over and over all the time. Your income gets taxed, then it's taxed again when you spend it, then it's taxed again when the store owner reports it as earnings, and on and on. There's no rule that once a dollar is taxed it shouldn't be taxed again. But, for some reason, it's only shareholders who complain about how unfair "double taxation" is [1].
I would no longer purchase stocks -- I would then prefer bonds (loans). Which means I would take risk into account, and this would stifle (some) innovation.
I don't mind taxation at all!
One issue you have to consider is inflation. If you buy a house in 1980 for 100k and sell it for $314k in 2020, you didn't really make any real income. You can adjust for inflation, so it shouldn't stop you from trying to make capital gains the same as ordinary income. But you do need to adjust.
Also, some types of assets subject to capital gains are separately taxed. If you own corporate stock, that corp might be paying a lot of income tax. That reduces the value of the stock, which means you are indirectly being taxed. Sometimes that indirect tax is basically a drop in the bucket compared to capital gains (holding Amazon or Uber long term), but for some assets it could be quite significant.
But one big reason is that the upper middle class are easier marks and hold much less power than the capital class.
Why do you think an incentive is needed? If the tax rate on investment gains was higher, do you think rich people would reduce the amount of money they invest? What would they do with their money other than investing it?
> the tax on labor should be brought down
Which government services would you cut to go along with the reduction in government tax revenue? Or would you put those payments on the next generation by borrowing?
as far as removing government services, I can't say exactly which ones I would cut, there are most certainly several, but the federal government needs to take a huge step back and allocate the money and power of many of its departments back into the hands of the state and local governments. there is too much nuance that the federal government doesn't understand about local communities that ends up inflating costs by ridiculous amounts because things are generalized across the entire population, and not tailored for the specific needs of a region.
The charts here speak for themselves, https://inequality.org/facts/wealth-inequality/
Lower taxes on the rich just makes the rich richer and everyone else poorer. We need fair taxes for all, not breaks for the rich and hope that they spend some of their extra cash.
US Government revenue is 32.5% of GDP, one of the lowest in the OECD
Of course, if you’re motivated by punitive instinct, instead of goal of taxing optimally to achieve maximum general welfare (including among low wage earners), you likely won’t find it appealing.
That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires.
We’ve been talking about taxing billionaires for as long as I’ve been alive and the solution seems so simple to me: income caps. We use income caps all the time for poor people but when talking about capital gains the arguments gets easily neutered because they get propose across the board, critically kneecapping the productive value of capital in capable hands.
It’s simple, just cap it at hundreds of millions at not so unreasonable rate. And all the talk on wealth inequality will have a very strong counter argument.
Instead every time we get a new tax it seems to hit everyone except the lowest sectors. Even here in Canada.
* income from capital is taxed extremely highly at a progressive rate
* the allowance/exempt amount is high enough to cover most investment based retirement plans
* the definition of "income from capital" was left open enough to at least cover most trading and rent-seeking but require explicit narrowing before the law could be passed
The goal was pretty much explicitly to tax income from actual labor less and income from simply already having capital a lot more.
And his famed slogan was “justice for the tens-of millionaires; never shall we suffer under the yoke of the hundreds-of millionaires again”.
That will be middle class if the gov keeps printing money the way they are. Setting tax rates on net worth is absurd. Taxes should be a flat rate cut of income, and all forms of income should be taxed the same.
A rich person who does this quickly stops being rich. Few rational rich people will do that. Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less.
No, that depends on how fast you're consuming it. For example, instead of investing most of your excess revenues, you can invest only half of it, and consume the other half. Or, if you are wealthy enough, you can keep consuming without investing for a long time. Lastly, you don't have to stay rich forever, as you can't take your wealth with you to the other side.
> Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less.
Unlikely: the rich already spend only rather small fraction of their incomes, and it is the prospects of making more money in future that is keeping them from spending more.
When you invest in a venture, you pay taxes on the profits. You pay taxes on the dividends it throws off. Whatever accumulated value remains when you sell your share gets hit by capital gains tax.
The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax.
That's not to say the total taxation of capital income is or isn't unfair (or is or isn't double/triple taxed), but it's misleading to just look at capital gains as an income source in isolation.
This is not true. When you invest in a venture, hold its stock for 60 days, and it pays you its profit, this income is considered "qualified dividends" and is subject to capital gains tax.
> The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax.
What are "profit tax" and "dividend tax"? These are not terms used in USA.
From the IRS rules:
> Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
https://www.irs.gov/taxtopics/tc404
> Qualified Dividends > Holding period. You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.
https://www.irs.gov/publications/p550#en_US_2020_publink1000...
And? Okay, that's a) a special case, and b) confirmation of the point I was making that you get taxed on dividends (and on capital gains) only as one piece of total "capital income taxation". (The fact that something is taxed at the capital gains rate does not somehow mean that the dividends were not taxed, as you seem to be implying.)
>What are "profit tax" and "dividend tax"? These are not terms used in USA.
It sounds like you're just trying to be difficult and uncurious at the cost of a productive discussion.
I was speaking in the most lay, general terms. Profits are taxed. Dividends are taxed. In normal, ordinary usage of English, one can refer to those taxes as "profit taxes" and "dividend taxes", even if the technical term is different. (Your native language probably does the same.)
If I go through you posting history, am I going to find you always using the technical term?
Yes, the "profit tax" I referred to would be more technically referred to as the corporate income tax. The dividend tax also might have a more technically accurate term, similarly irrelevant to this context or point.
>Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
I don't know why you think this is relevant to my point. It just means sometimes the rate is different from "the" capital gains tax. In no way does it refute that the events of profit and dividend payment are subject to a separate tax, making the "capital gains tax" an incomplete picture of the tax rate on capital income.
If you agree with that latter point, then you agree with my comment, and you're just cluttering the discussion with misdirection and red herrings.
You replied with "Because the capital gains tax is only a portion of the tax applied to capital income." You went on to list several kinds of taxes.
My reply shows that the taxes you listed are all capital gains tax. To support your claim, you could list taxes that are not capital gains tax.
> > Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
> I don't know why you think this is relevant to my point. It just means sometimes the rate is different from "the" capital gains tax.
No. Please take a few minutes to read the sections I linked to. Here's an article that explains it https://www.investopedia.com/ask/answers/12/how-are-capital-... .